The board of CG Power & Industrial Solutions has sacked Gautam Thapar as its chairman with immediate effect after an investigation unearthed a multi-crore financial scam in the firm.

In a regulatory filing, the firm stated, “In cognizance of the current situation being faced by the company and the recent developments, including disclosures dated August 19, 2019, made by the company, the board of directors... passed by majority consent, have resolved to remove Gautam Thapar as the chairman of the board with immediate effect.”

The move comes as an investigation instituted by the board had found major governance and financial lapses, including some assets being provided as collateral and the money from the loans siphoned off by identified company personnel, both current and past, including certain non-executive directors. In addition, some liabilities and advances to related and unrelated parties had been understated.

Thapar has, however, denied allegations that he misappropriated funds of the power equipment maker, which is part of Avantha Group. In a statement, Thapar said he has repaid Rs 4,000 Cr to various lenders since 2015 and allegations of fraud were unfounded.

In May this year, CEO and Managing Director K N Neelkant was sent on leave, pending an investigation into some suspect, unauthorized and undisclosed transaction, while Thapar continued as the company chairman.

Thapar holds only 8,574 shares out of 62.6 crore shares of the company. Though a founder promoter of CG Power, he lost almost all of his shares after lenders, in past years, invoked pledges he had created to borrow money. 

The company added that the transactions appear to be undertaken in a "seemingly fraudulent manner" and that it would investigate them further. The board had informed the BSE that the company’s risk and audit committee had uncovered fraud by employees — to the extent of understating the company’s liabilities by more than Rs 1,000 crore. According to the filing, recovery of these amounts together with interest will be evaluated with appropriate legal inputs.

Though the company now plans to conduct a detailed forensic investigation to establish wrongdoing, the development has once again brought the focus on the sad state of affairs of corporate governance in Indian companies.  The case shows there is still much to be done when it comes to ensuring companies do not indulge in financial and governance irregularities.

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